First National Bank (FNB) is intensifying its fight for a share of the mobile phone market with the launch of two smartphones that carry its branding.
The bank already runs a mobile virtual network operation (MVNO) called FNB Connect, which piggybacks on Cell C’s network to offer data and voice packages. FNB Connect, which launched in June last year, already has 400,000 customers, making it one of the best-performing MVNOs.
For years FNB has been positioning itself as a mobile and banking company, with the main aim of making banking available to its clients in real time.
Though the company has been selling smartphones and tablets for years, its latest salvo could shake up the own-brand cellphone market. Vodacom recently launched its own branded smartphones and tablets in a bid to drive smartphone adoption.
"Everyone wants to own the market when it comes to mobile, but this is becoming much more than just about offering cellphone contracts and is expanding into other products and value-added services, " says Antony Seeff, CEO of cellphone spend-management company Tariffic.
World Wide Worx MD Arthur Goldstuck describes FNB’s move as a "fascinating intervention". FNB already has a captive market of customers who are registered through the Financial Intelligence Centre Act and vetted for credit.
It also has the "sales channel ready made, and is not arriving in the market out of the blue", as it has been building its digital products as well as its telecommunications offering for some time, he says.
Head of smart devices at FNB Kartik Mistry says: "In line with the global trend towards convergence in digital migration, we believe that it’s critical to empower our customers with smartphones that not only improve their banking and mobile experience, but are also affordable and of a high quality."
FNB-branded handsets are only available on contract. The entry-level phone, the ConeXis A1, is priced at R59/month for 24 months and the high-end handset, ConeXis X1, will cost R150/month. Both come with limited free minutes and data bundles.
But there are some potential barriers to entry. The phones are Sim locked, which meansno Sim card other than one linked to FNB Connect can be used until the end of the contract. And customers are required to pay an interest-bearing deposit of R500 for the A1 and R1,500 for the X1. This will be reimbursed once the contract expires.
Jan Kleynhans, CEO of the FNB consumer segment, says the deposits are intended to encouragecustomers to save. FNB has also tied the handset packages to its reward programme, eBucks.
But in a market where no other mobile network operator asks for a deposit, FNB’s strategy is a gamble.
"The deposits are barriers to entry, considering that one can buy an entry-level smartphone for R500. It is difficult to see entry-level users depositing that amount merely as a ticket to the smartphone game," says Goldstuck.
"The high-end model is more attractive and offers tremendous value for money, especially as eBucks users get a portion of the monthly fee back."
Goldstuck says the absence of a prepaid model is not that big a deal in the FNB environment. The contract becomes part of already existing account management, rather than being a question of monthly budgeting.
But "it could discourage non-customers from signing on just for the phones," he says.
Seeff agrees that the deposits and Sim lock are barriers to entry. But FNB is targeting a niche market and he says he presumes it is "willing to intentionally limit the distribution of these phones to [its] target market".
In addition to the handsets, FNB has also introduced a R399/month package of unlimited calls. It is R99 more expensive than a similar deal offered by another MVNO, me&you mobile. But FNB believes its latest packages will introduce a bold new era for banking.
Aside from being a pioneer in the mobile space, FNB has also extended its lead over rivals when it comes to integrating traditional banking and digital services. Other SA banks are a long way behind, with no definite strategy to target the mobile market.
And there may be room for FNB to take this further.
The Independent Communications Authority of SA has made a provision for MVNOs to get access to the spectrum from companies that will be awarded spectrum licences. The spectrum will allow for the roll-out of 4G broadband infrastructure.
And with this provision, there is a possibility that FNB could position itself to become a fully fledged cellphone provider.
But Goldstuck says he would be surprised if FNB were to apply for a licence.
Seeff also thinks this unlikely. "I would imagine that the obvious growth areas for FNB would be to consider taking FNB Connect to [its] business banking client base and to expand its offering to include other networks," he says.